PFRS 11- JOINT ARRANGEMENTS

Type of Joint Arrangement

o Based on rights and obligations
o Economic substance
Arrangement- activity or operation or specific grouping of assets which may not
form a legal entity (example: company)
Joint arrangement two or more entities have an arrangement between each
other such that these entities have joint control of the arrangement
Characteristics Of Joint Arrangement
o Contractual agreement
contract in writing (articles of association or constitution)
o gives two or more parties control
contractually agreed sharing of control
unanimous consent of parties (no party can make unilateral
decisions about relevant activities)
Parties with joint control joint venturer or joint operator
The existence of joint control is implicit even if not used in the agreement
Joint control
o 2 parties can control the agreement (not always)
o Unanimous decision required
o No multiple combinations of parties could could have control
If no joint control and significant, treat it as an associate (see diagram for
PFRS11)

JOINT VENTURE VS JOINT OPERATIONS

(dependent on rights and obligations)

JOINT OPERATION
o Joint control
o Right to assets and obligations to liabilities
o Each operator contributes use of assets or resources

JOINT VENTURE
o Joint control
o Rights to NET ASSETS
 o Usually involves establishment of corporation, partnership or other
economic entity
Each venturer has own ownership interest

SEPARATE VEHICLE
o Identifiable financial structure
o Legal entities whether or not with legal personality
o Term is broader that entity

JOINT OPERATIONS JOINT VENTURE

terms right to assets and rights to net assets
obligations
right to assets parties have all interest parties have no interest
(rights, title, ownership) in
a specified proportion

obligations for liabilities parties share all liabilities in Joint arrangement liable for
a specified proportion debts and obligations of
arrangement

parties are liable to the

extent of
Investment
Obligation to
contribute any
unpaid or additional
capital
revenue, expenses, P allocation of revenues and agreement establishes
and L expenses based on each partys share in the
performance of each party profit or loss
 GUARANTEES

JOINT OPERATIONS

WHAT TO RECOGNIZE
o Assets, share of joint assets
o Liabilities, share of joint liabilities
o Revenue from the sale of its share of the output from joint operations
o Share of revenue from sale of output from joint operations
o Expenses, share of joint expenses
ENTITY TRANSACTING WITH JOINT OPERATION IT IS AN OPERATOR OF
o Contributing assets
JO recognize gains and losses to the extent of the other parties
interest
If assets NRV reduces, kisses recognized fully by JO
o Purchase of Assets
No recognition of share of gains and losses until it resells those
assets to 3rd parties
If assets NRV reduces , JO recognize share of losses